Trogner v. New York Life Ins. Co.

• Decision Date: 17 April 1986
• Docket Number: Civ. No. Y-85-4106.
• Citation: 633 F. Supp. 503
• Parties: Emolyn L. TROGNER v. NEW YORK LIFE INSURANCE CO., et al.
• Court: U.S. District Court — District of Maryland

633 F. Supp. 503

Emolyn L. TROGNER v. NEW YORK LIFE INSURANCE CO., et al.

Civ. No. Y-85-4106.

United States District Court, D. Maryland.

April 17, 1986.

COPYRIGHT MATERIAL OMITTED

Susan Silber, Takoma Park, Md., and David B. Adler, Washington, D.C., for plaintiff.

Frank J. Vecella, Baltimore, Md., for defendant New York Life Ins. Co.

Larry A. Ceppos, Rockville, Md., for defendant Kaiser Foundation Health Plan of Mid-Atlantic States, Inc.

MEMORANDUM

JOSEPH H. YOUNG, District Judge.

Plaintiff, Emolyn Trogner, brings this action alleging that she was wrongfully denied disability benefits under an insurance contract issued by defendant New York Life Insurance Company ("New York Life"). The insurance policy was arranged and premiums paid by Trogner's employer, defendant Kaiser-Georgetown. Both defendants move to dismiss the complaint, or in the alternative, for summary judgment, on the bases that all common law claims are pre-empted by the Employees Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., and because the ERISA claims are barred by the statute of limitations.

Substantively this case is a factual dispute as to whether or not Trogner was covered by her disability insurance when she suffered a heart attack on September 11, 1982. She had begun working for Kaiser-Georgetown as an administrative secretary in February, 1981, and on September 3, 1982, she signed a voluntary resignation form which was to terminate her employment. Trogner contends that the resignation was effective on September 22, 1982 — nineteen days after the form was signed and 1½ weeks after she became disabled. Thus, she insists that she is eligible for benefits under the employee insurance plan. Defendants argue that her resignation was effective immediately upon signing the form on September 3, 1982, and therefore she was not an employee at the time of her illness.

Plaintiff's original complaint contained six counts and a seventh count was added in plaintiff's amended complaint. Counts I and II are against New York Life for breach of long and short term disability benefits contracts. Counts IV and VI are against Kaiser-Georgetown alleging the intentional interference with contract or protected property rights (Count IV), and the breach of employment contract (Count VI). Counts III, V, and VII are against both defendants. Count III alleges a breach of duty of good faith and fair-dealing, Count V alleges intentional infliction of emotional distress, and Count VII charges defendants with violations of duties imposed under ERISA.

COMMON LAW STATE CLAIMS

Both defendants argue that the state claims brought against them in Counts I through VI must be dismissed because the benefits plan is regulated under the comprehensive federal scheme developed in ERISA, and because all state actions are pre-empted by it. The statutory scheme was designed to promote the interests of employees and their beneficiaries in employee benefit plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1982). In an effort to regulate the employee benefits field, Congress provided that ERISA "shall supersede any and all State laws insofar as they may ... relate to any employee benefit plan." 29 U.S.C. § 1144(a). This pre-emption clause has been the subject of extensive debate, yielding various conflicting interpretations of the provision's intended scope. Essentially, defendant's urge this Court to interpret the clause as precluding the maintenance of all common law state claims against the employer and the insurer.

"Although the language of the pre-emption clause is broad, it is not all-encompassing," Lane v. Goren, 743 F.2d 1337 (9th Cir.1984), and it most certainly does not have the breadth which defendants suggest. See Rebaldo v. Cuomo, 749 F.2d 133, 138 (2d Cir.1984). Through ERISA, Congress established benefits plan regulations as exclusively a federal concern, Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981), yet there are several explicit limitations on the scope of state law pre-emption. The two which are relevant to the inquiry in this case are that: 1) the pre-empted law must "relate to" employee benefits plans, 29 U.S.C. § 1144(a); and 2) the pre-empted law may be "saved" by the exception for laws which regulate insurance, 29 U.S.C. § 1144(b)(2)(A). Plaintiff's claims must be scrutinized in terms of these two limitations as to each defendant to determine whether or not the claims are pre-empted. In regard to the employer, Kaiser-Georgetown, the analysis must begin with whether the employer has provided a "plan" which falls within the scope of ERISA. If so, then the question is whether the state claims against the employer "relate to" the plan to cause them to be pre-empted by the federal statute. In contrast, since New York Life is an insurer, the claims against it must be analyzed within the context of the insurance saving statute to determine whether the common law claims are properly pre-empted.

KAISER-GEORGETOWN — CLAIMS AGAINST THE EMPLOYER

The initial inquiry must determine if the disability plan under which plaintiff contends she is entitled to benefits, falls within the scope of ERISA, thereby triggering the state law pre-emption. Plaintiff argues that the plan is not covered by ERISA because the employer did not comply with the required ERISA filings with the Department of Labor. Kaiser-Georgetown disputes this alleged noncompliance, yet argues that coverage under ERISA is not contingent on the employer or plan sponsor completing an application with the Department of Labor. It is clear that the employer's filings are irrelevant, because the coverage of ERISA is defined by statute and is not contingent on the employee's acts.

An employee benefit plan includes:

any plan, fund, or program which was ... established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services.

29 U.S.C. § 1002(1); Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982). The parties agree that the disability income insurance was provided by Kaiser-Georgetown as part of a benefits package, for which it paid 100% of the premiums. Kaiser-Georgetown maintained the plan through the purchase of insurance which provided benefits in the event of disability, and this arrangement falls within the scope of ERISA regulation. This discussion also disposes of plaintiff's arguments that Kaiser-Georgetown is not covered by ERISA because it is not a fiduciary or because it is deemed to be an insurance company. This plan clearly fits the definition of an employee benefits plan, and falls within the scope of coverage of the Act. 29 U.S.C. § 1003. Also, the employer cannot be "deemed" to be an insurer simply because it purchases insurance from an insurance company against which state claims are saved pursuant to 29 U.S.C. § 1144(b)(2)(A). See 29 U.S.C. § 1144(b)(2)(B) (an employee benefit plan shall not be deemed to be an insurance company).

Since the plan does fall within the scope of ERISA, the next question is whether the state claims brought against the employer are pre-empted by the federal statute. Under 29 U.S.C. § 1144(a), all state laws are superseded "insofar as they relate to any employee benefit plan." The phrase, "relates to," has caused significant confusion when it is applied to laws, which have a very general application, such as plaintiff's common law claims. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 524, 101 S.Ct. at 1906 (concluding that state law governing workers' compensation laws did relate to pension plans because of indirect intrusions). The courts have given the phrase its

broad common sense meaning, such that a state law `relates to' a benefits plan `in the normal sense of the phrase, if it has a connection with or reference to such a plan. The pre-emption provision was intended to displace all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirements. `Even indirect state action bearing on private pensions may encroach upon the area of exclusive federal concern.'

Metropolitan Life Insurance Company v. Commonwealth of Massachusetts, ___ U.S. ___, ___, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 525, 101 S.Ct. at 1907, and Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95-99, 103 S.Ct. 2890, 2899-2901, 77 L.Ed.2d 490 (1983)).

The state common law claims brought against Kaiser-Georgetown are the intentional interference with contract or protected property rights, breach of employment contract, breach of duty of good faith and fair-dealing, and intentional infliction of emotional distress. In general, courts have refused to entertain such state common law claims. See, e.g., Kuntz v. Reese, 760 F.2d 926, 933-35 (9th Cir.1985) (misrepresentation claim held pre-empted); Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1216 (8th Cir.), cert. denied, 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981) (claims for tortious interference with contract held pre-empted); Authier v. Ginsberg, 757 F.2d 796 (6th Cir.1985) (action for retaliatory discharge held preempted); Justice v. Bankers Trust Co., Inc., 607 F.Supp. 527, 531 (N.D.Ala.1985) (common law fraud and contract claims pre-empted). Taking a common sense approach, it is clear that the contract related claims and the breach of duty of good faith and fair-dealing claims are precisely in the field which ERISA was intended to occupy — they are actions for improper management of the plan similar to those under ERISA. The...